McDonald’s shareholders vote on Carl Icahn proxy fight over animal welfare

McDonald's shareholders assembly on Thursday morning will mark the climax of a proxy fight waged by activist investor Carl Icahn, who’s pushing for 2 seats on the fast-food big's board amid a battle over its animal welfare practices.

Tallies of early votes present McDonald's will seemingly triumph, the Wall Street Journal reported Tuesday. Shareholders can maintain voting till the assembly concludes, however individuals aware of the matter informed the newspaper these ballots are unlikely to alter the end result.

Icahn has publicly criticized McDonald's for failing to fulfill its authentic deadline for eliminating gestation crates for pregnant pigs, a apply animal rights activists say is merciless. He has additionally argued that the corporate was imagined to ban the usage of crates fully however has since modified the scope of its dedication.

For its half, the Chicago-based firm has blamed the Covid-19 pandemic and African swine fever outbreaks for pushing again its authentic deadline of 2022 set a decade in the past. By the top of this yr, McDonald's now expects 85% to 90% of its U.S. pork provide to return from pigs that aren't stored in gestation crates in the event that they're confirmed to be pregnant. McDonald's has additionally mentioned that fully eliminating the usage of the crates would elevate its prices and lead to clients paying extra.

In his push on the therapy of pigs, Icahn has additionally taken swipes at McDonald's broader commitments to deal with environmental, social and company governance points.

"We believe there is a connection between animal welfare issues and inadequate governance, and therefore, other related ESG risks that the Company is not adequately attending to," he wrote in his letter to fellow McDonald's shareholders.

Icahn nominated Leslie Samuelrich, a sustainability-focused investor, and Maisie Ganzler, an government at Bon Appétit Management, to exchange current board members Sheila Penrose and Richard Lenny. In whole, McDonald's has 12 seats on its board.

"Two seats on a large board like McDonald's is not huge, but I think it's the message that it would send to others in the industry that they need to do more to make sure their board has representation from experts in this area, rather than just giving someone a title that oversees ESG," Barclays analyst Jeffrey Bernstein mentioned.

Carl Icahn takes on McDonald's over its therapy of pigsThe News with Shepard Smith

Because of McDonald's dimension and the large volumes of components it makes use of, modifications to the corporate's provide chain are inclined to have a ripple impact all through the trade. McDonald's says its McRib sandwiches and the bacon for its burgers and breakfast sandwiches account for about 1% of U.S. pork provide.

Icahn is waging an identical proxy fight at Kroger, the most important U.S. grocery store chain operator within the U.S. Kroger's annual assembly is scheduled for June 23.

Securing votes

Icahn solely owns about 200 McDonald's shares, a comparatively tiny stake that doesn't give him a lot sway in voting.

"Two hundred shares is so far away from having any influence on a company," mentioned Bruce Kogut, a professor of company governance and ethics at Columbia Business School. "My guess is that it's about publicity, and he now cares about a sustainable environment or ESG targeting, and he's announcing himself as an activist in that space."

In lobbying for extra votes, Icahn referred to as out giant Wall Street corporations for "hypocrisy" and mentioned they're capitalizing on ESG investing for the earnings with out supporting "tangible societal progress." McDonald's high three shareholders are The Vanguard Group, the asset administration arm of State Street, and BlackRock, in keeping with FactSet.

Icahn has additionally fallen wanting profitable over the highest two proxy advisory corporations, Institutional Shareholder Services and Glass Lewis, which make suggestions to hundreds of funds on find out how to vote in shareholder conferences.

ISS solely supplied "cautionary support" to Icahn's nominees, saying that shareholders ought to think about whether or not the present board is targeted sufficient on ESG points. But the agency famous the proxy fight is notable as a result of Icahn has targeted it on points corresponding to animal welfare, protein diversification and pay hole, reasonably than operational points.

"It may well be remembered as the first true 'ESG contest,'" ISS mentioned.

Glass Lewis, in contrast, suggested in opposition to voting for the brand new board members. It mentioned that Icahn's push to enhance animal welfare circumstances is a "worthy and noble," however that it takes a "simplistic" view of the problem. And it famous the efforts don't give substantive regard to the corporate's financials.

The Humane Society of the United States has put forth a shareholder proposal echoing Icahn's criticisms, asking the corporate to substantiate that it’ll attain its earlier objective of eliminating the confinement of gestating pigs by 2022. If the corporate can't attain that concentrate on, it's requesting extra disclosure about its pork provide chain. Icahn has teamed up with the group up to now, and his daughter, Michelle Icahn Nevin, used to work with the group.

Such shareholder proposals are nonbinding however can ship a message to company boards about public help for firm practices. McDonald's is dealing with six different shareholder proposals addressing points together with plastics use, antibiotics and lobbying actions.

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